Growing concerns about the risk of conflict on the Korean Peninsula and some disappointing corporate earnings reports sent the major U.S. equity benchmarks lower for the week. The Dow Jones Industrial Average’s streak of nine record-setting high closes ended Tuesday as rhetoric between the U.S. and North Korea escalated, with President Donald Trump saying that North Korean aggression would be met by “fire and fury.” More substantial losses followed on Thursday—for the day, the tech-heavy Nasdaq Composite lost 2.13%, the broader S&P 500 Index declined 1.45%, and the blue chip Dow was off nearly 1%.

Thursday’s sell-off ended a period of record-low volatility during which the S&P 500 Index had gone 15 days without moving more than 0.30%. Equities recovered somewhat on Friday.

MACRO NEWS

North Korea threatens Guam after Trump’s warning

US president Donald Trump warned North Korea in no uncertain terms this week that its continued threats, if carried out, would be met with overwhelming force. North Korea, undeterred, announced it was planning to target the waters surrounding the US territory of Guam with four missiles and that a plan would be ready within a matter of days. Trump responded by noting US military plans are now “locked and loaded” should North Korea act unwisely. Earlier this week intelligence assessments became public revealing that North Korea has likely acquired the technological capability to miniaturize a nuclear warhead, making it deliverable by missile. North Korea recently tested a missile believed to have the range to reach parts of the United States. Tensions have risen further in the wake of additional United Nations sanctions against North Korea that were unanimously agreed upon by the UN Security Council. The sanctions aim to cut North Korean exports by one-third and ban exports of coal, iron ore and seafood.

Muted US inflation data raise questions for Fed

The Consumer Price Index rose just 0.1% in July after not rising at all in June, the fifth straight month of below-forecast inflation figures. While the US Federal Reserve has said it sees the recent decline in inflationary pressures as transitory, markets are not so sure. Futures markets forecast just a 40% chance of another rate hike before the end of this year.

Venezuelan superbody declares itself supreme

The newly created Constituent Assembly this week declared itself supreme over all other branches of Venezuela's government. A growing list of governments, including the US, the European Union and the supranational Organization of American States, have declared the assembly illegitimate. The US went so far as to sanction eight individuals with roles in the body’s formation, but has yet to sanction Venezuela’s oil industry, which is the third-largest global exporter of crude to the US.

European shares suffer Trump backlash

European stocks fell following rising tensions between U.S. President Donald Trump and North Korea’s leader Kim Jong-un. The pan-European benchmark Stoxx 600 logged three consecutive days of losses, ending the week nearly 3% lower—one of the worst weekly losses this year. The FTSE 100 hit a three-month-low on Friday, and on Thursday Germany’s DAX 30 briefly traded below the 12,000 level for the first time since April.

UK opens the bidding at €40 billion?

British negotiators appear to have floated a trial balloon in the press on the size of the divorce payment Theresa May’s government would be willing to pay to leave the European Union. The Sunday Telegraph reported that the United Kingdom would be willing to pay €40 billion, but only on condition that the payment come as part of a deal that included the future trade relationship with the EU. UK officials shot down the report as speculative, but it would appear to be a reasonable starting point for negotiations. EU officials have floated exit-charge figures of between €50 billion and €100 billion.

EARNINGS NEWS

As of 9 August, 447 of S&P 500 Index companies have reported earnings for the second quarter. Earnings for the index as a whole are expected to rise 11.9% compared with the same quarter a year ago, and 9.2% when stripping out energy companies. Revenues are seen up 5.1% versus Q2 2016, 4.1% ex-energy.